Buying into the pension fund: less tax, higher pension

The 2nd pillar is for many Swiss residents their largest asset — and their least understood. Buying into the pension fund combines two advantages: immediate tax savings today and a higher pension tomorrow. Here is how coordination, conversion and buy-ins interact.

Coordinated salary: what is actually insured?

Never the whole salary is insured. From gross pay the coordination deduction (CHF 26,460, 2025 figures) is subtracted; at most CHF 64,260 is insurable. Example: on CHF 95,000 gross, coordinated salary is CHF 68,540 — but capped at CHF 64,260. Everything above is invisible to compulsory provision (many funds insure beyond, in the extra-mandatory part).

The conversion rate: 6.8 % by law

In the compulsory part, retirement savings convert to an annual pension at 6.8 %: CHF 400,000 of savings yields CHF 27,200 of pension per year. Many funds apply lower rates in the extra-mandatory part (often 5–5.5 %) — read your pension certificate closely: the difference is worth thousands per year.

The buy-in: double leverage

• Tax leverage: every franc bought in reduces taxable income. CHF 50,000 of buy-in at a 25 % marginal rate saves CHF 12,500 in taxes — immediately.
• Pension leverage: the savings keep compounding and raise the future pension. CHF 50,000 of buy-in means roughly CHF 3,400 of extra annual pension at 6.8 %.
• Deadlines: no lump-sum withdrawal within three years of a buy-in, or the deduction is retroactively cancelled.

Example: age 45 with a gap

After studies and part-time years, Ms M. lacks CHF 120,000 in savings. She buys in CHF 40,000 per year for three years. At a 28 % marginal rate she saves about CHF 33,600 in taxes overall, and her projected annual pension rises by over CHF 8,000. Your fund certificate states your personal buy-in gap in black and white.

Pension or lump sum? A decision aid

• Full pension: lifelong guaranteed income; ideal with high life expectancy and little savings besides.
• Full capital: flexibility, inheritability, own strategy — but self-responsibility into your 90s.
• Mix (recommended): cover basic needs with the pension, keep the rest as capital for flexibility and stagger taxes.
• Tax timing: lump sums are taxed separately at the provident rate — withdrawals staggered over years and cantons lower progression.

Early withdrawal for home ownership (WEF): the rules

Instead of buying in, you can withdraw early for owner-occupied housing — with clear guardrails:

• Minimum amount: CHF 20,000 per withdrawal (possible once every 5 years).
• Taxation: separate provident rate, distinctly lower than ordinary — for CHF 100,000 withdrawn, roughly CHF 5,000–8,000 of tax depending on canton.
• Repayment: possible until three years before retirement, mandatory on sale.
• Alternative: pledging instead of withdrawing — the savings stay invested, the bank gets collateral.

Mini case: buy-in at 55

Mr B., 55, holds CHF 180,000 in savings with CHF 90,000 of buy-in potential. He buys in CHF 45,000: at a 30% marginal rate he saves CHF 13,500 in taxes in the buy-in year. The CHF 45,000 grows to about CHF 60,000 by 65 (at 3%). His annual pension rises by about CHF 3,060 (6.8%). Important: after a buy-in, no lump-sum withdrawal for three years — or retroactive taxation looms. Those planning several tranches stagger them across high-progression years.

Calculate your gap with SwissCalc's pension fund calculator, and project the growth with our compound interest calculator.